STATEMENT OF FACTS

1. M/s ----, (hereinafter referred to as the Appellant) is filing the present appeal
against the impugned Order-in-Original in Form GST DRC-07 issued vide
Ref No.--- ------- dated -------- the Learned Excise & Taxation Officer cum
Proper Officer of State Tax,. Copy of the impugned Order-in-Original is
enclosed as Annexure-1.

2. Vide the above impugned Order-in-Original in Form GST DRC-07 issued

vide Ref No.--------dated -------- the Learned Excise & Taxation Officer cum
Proper Officer of State Tax, has observed that:-

1. In response to the aforesaid notice, served through online portal and also
served to the tax payer manually neither the taxpayer nor his
representative appeared before the undersigned and failed to submit any
reply/document in response to the show cause notice. Hence the
undersigned has no other option but to decide the case exapte on merits.
Therefore, keeping in view facts of the case and relevant record placed
on file, the proposed tax, interest and penalty is hereby confirmed and the
taxpayer is directed to pay the following amount within thirty days of the
receipt of this order, failing which action will be taken as per law;-

3. M/s ---------- (hereinafter also referred as ‘the appellant’), is registered as

Normal tax Payer under section 22 of the CGST Act 2017 having GSTIN
---------- and are engaged in the activities of manufacturing of Blocks falling
under HSN ----. Principal input i.e. Cement required for doing taxable
activities is procured by the appellant from registered Dealers (GST Normal
Tax Payers) including M/s ---------- under cover of Tax invoice as prescribed
under rule 46 of the CGST Act 2017. The appellant is also filing regularly
and properly the Tax returns i.e. GSTR-1 & GSTR3B as prescribed under
section 39 of the CGST Act 2017. The appellant is also maintaining
necessary record/accountal of final products as well as the inputs.
 SHOW CAUSE NOTICE AND ALLEGATIONS IMPOSED THEREIN
4. The appellant has been served a Show Cause Notice issued Reference
Number ----- ------------ dated ------- under section 74(1) of Haryana Goods
and Service Tax At 2017 vide Form DRC-01 (under section 142(I) of the
CGST Act 2017 for proposing the under mentioned demands:

5. While raising show cause notice, the following objections were raised;

a. Whereas on -------, an inspection/search was conducted by the officers of

the department at business premises of M/s----------, in compliance of
order of Additional Commissioner of State Tax (Enf-II) Panchkula issued
vide order dt. -----------. Officers of the department seized various
documents from business premises of the firm under section 67 of HGST
2017. Statement of Sh.--------- was also reported before the officers of the
department.

b. On ----------, present Sh.---------, Prop. Of the firm, sale/purchase bill

book seized from the business premises of the firm were examined. The
difference of Rs. --------- was noticed in sale as per bill book seized when
compared with the sale shown by the dealer in his GST online returns in
the month of -------- and ------. Therefore, it is clear that as per bill book
seized, excess sale of Rs. ----------- is shown as compared to returns
involving tax amount of Rs. ---------.

c. The inspection team has seized tax invoices of M/s --------- GSTIN
---------- amounting to Rs. ---------- involving tax amount of Rs. --------
from business premises of M/s------- ----. This purchase has also been
reflected in GST returns 2A of the dealer. The reports regarding physical
verifications of M/s ------------ have been received from the concerned
jurisdictional Taxation inspectors under rule 25 of SGST/CGST Act
2017. The registered person M/s ----------- was not found functional at the
registered place of business mentioned in their registration certificate
therefore panchnama was prepared to this effect by the concerned
taxation inspector -------- on dt. ------------ after proper inquiry. Also the
proprietors of the firms were not traceable. Therefore, considering all the
 aforesaid facts, a FIR No.----- dt. ------ was lodged at Police Station,
----------------, ------ by the concerned proper officer.

d. From the above facts, it is evident that registered person M/s ------------
were nonexistent and got themselves registered under SGST/CGST Act
2017 on the basis of fake and forged documents and deceived the
Government Authorities fraudulently by uploading forged documents and
used Government GST online portal for passing input tax credit to other
registered person by issuing invoices and generating Eway bills with
intention of evade payment of tax. In this regard GSTR-1 returns filed by
the above non-existent registered persons for the period in question were
examined and it was noticed that these registered persons have shown to
be made huge supplies to M/s ----------.

e. Statement of owners of the vehicles numbers was recorded wherein they

disclosed that their vehicle has not been used for movement goods
mentioned in the aforesaid invoices. In the other words it establishes that
the tax invoices were issued only to pass wrongful input tax credit
without movement of goods.

f. On the basis of detailed inquiry in this regard, it is proved that the

registered person in question has not conducted active business with the
non-existent registered person named above and rather have indulged in
claiming wrong input tax credit on the strength of fake invoices.
Therefore, from the above discussion and enquiry it is clear that;

i. The difference of Rs------- was noticed in sale as per bill book

seized when compared with the sale shown by you in GST online
returns.
ii. You have shown purchases from M/s ------------------ which is non-
existent dubious registered person as per taxation inspector report
and has uploaded fake/forged documents on GST common portal.
iii. From the statements of vehicle owners mentioned in the tax
invoices of M/s---------- -, it is clear that only invoices have been
issued without movement of goods.
6. However, neither appellant has been granted sufficient time for filing of
reply to the show cause notice nor any opportunity of personal hearing was
granted to the appellant before adjudication of the matter violating the
Principles of Natural Justice. Consequently Order has been passed without
any submissions made by the appellant towards allegations made in the
show cause notice.

7. Being aggrieved by the above mentioned Order-in-Original, the appellant

herein is filing the present appeal, inter alia, on the following grounds which
are independent of and without prejudice to each other:

GROUNDS OF APPEAL

8. At the outset the appellant refuted all accusation fabricated against them in
totality. The contentions made in the show cause notice are fallacious and
incorrect and are based entirely on assumptions and presumptions and
without appraising the facts and circumstances in the legal perspectives. The
appellant denied to have contravened any rule/provisions of the CGST Act
2017/SGST 2017/CGST Rules 2017. The appellant submit that the
proceedings as initiated vide the impugned show cause notice are only
arbitrary and against the legislative laws.
LEGAL OBJECTIONS
SHOW CAUSE NOTICE IS INVALID ISSUED VIDE DIN
9. In keeping with the Government’s objectives of transparency and
accountability in indirect tax administration through widespread use of
information technology, the CBIC is implementing a system for electronic
(digital) generation of a Document Identification Number (DIN) for all
communications sent by its offices to taxpayers and other concerned
persons. To begin with, the DIN would be used for search authorization,
summons, arrest memo, inspection notices and letters issued in the course of
any enquiry. This measure would create a digital directory for maintaining a
proper audit trail of such communication. Importantly, it would provide the
recipients of such communication a digital facility to ascertain their
genuineness. Seeing this circular was being issued by the department, the
first thing that comes in our mind is a prominent film where some fake
officers enter premises of some leading business showing search warrant
 which in the end turns out to be fake. The Government has issued Circular
No. 122/41/2019-GST dt. 5.11.2019 which mandates in case of all the search
authorization, summons, arrest memo, inspection notices and letters issued
in the course of enquiry to quote unique Document Identification Number
(DIN). This issuance of DIN is mandated by the board under the power
conferred under section 168(1) of the Central Goods and Services Tax Act
and is made effection from 8th November 2019. The para no. 2 & 4 of the
referred circular is extracted as below:-
“The Board in exercise of its power under section 168(1) of the CGST
Act, 2017/ Section 37B of the Central Excise Act, 1944 directs that no
search authorization, summons, arrest memo, inspection notices and
letters issued in the course of any enquiry shall be issued by any officer
under the Board to a taxpayer or any other person, on or after the 8th day
of November, 2019 without a computer-generated Document
Identification Number (DIN) being duly quoted prominently in the body
of such communication”.
“The Board also directs that any specified communication which does not
bear the electronically generated DIN and is not covered by the
exceptions mentioned in para 3 above, shall be treated as invalid and
shall be deemed to have never been issued”.

10.At the time of implantation of GST, the three kinds of tax structure were
implemented to enable taxpayers to take the credit against one another, in
this way guaranteeing “One Nation, One Tax”. India is a federal nation
where both the Center and the States have been appointed the powers to
impose and collect taxes. The two Governments have particular
responsibilities to perform, according to the Constitution, for which they
have to raise tax revenue. The Center and States have simultaneously levied
GST. Therefore, apply these terms, DIN procedure adopted under CGST act
and provisions made thereunder shall also apply to the SGST Act mutatis
mutandis and therefore, show cause notice issued without DIN have no legal
values.

11.Whereas in the present case, show cause notice has been issued on
dt.--------- which does not bear any DIN and thus according to the para 2 & 4
 of the referred circular, this show cause notice is entirely invalid and is
deemed to have never been issued and consequently entire adjudicating
process goes redundant. Accordingly impugned order dt. ------- is liable to
be quashed.

UNRELIED UPON DOCUMENTS NOT RETURNED TO THE

APPELLANT & RELIED UPON DOCUMENTS NOT PROVIDED

12.Without prejudice to the above submissions, At the time of investigation and

during visit of the appellant’s premises by investigation team, certain
documents were seized by the department in original, out of which some of
documents were relied upon by the department and some were irrelevant to
investigation as not relied upon, the appellant have not been provided
photocopies of the relied upon documents and original copies of non-relied
upon documents were not provided to the appellant so as to reconcile the
records which is tantamount to violation of Principle of Natural Justice.

13.It is further stated that documents seized during investigation which were not
relied on in show cause notice as they belong to party from whom they are
seized, Department does not have absolute right to retain them, unless they
were required for further investigation. For their return, Department cannot
insist that assessee identify those documents which were required for their
defence. Show cause notice alleging availment of ITC on the basis of tax
invoices raise by non-existent registered person, vehicle numbers mentioned
not used for movement of goods, sales as per GST record does not match
with the tax invoices issued etc. These documents are relevant for assessee
to prepare their defence reply, and by not returning them to assessee,
Department caused prejudice to assessee. Regarding retention of un-relied
upon documents, Revenue authorities have no use for and right to the un-
relied upon documents and continued retention of such documents wholly
unjustified. The appellant may also have use of those documents in
preparing its defence reply and written submissions at the time of personal
hearing. The Hon’ble High Court of Allahabad in the matter of M/s
PARMARTH IRON PVT. LTD. Versus COMMISSIONER OF CENTRAL
 EXCISE-I reported in 2010 (255) E.L.T. 496 (All.) that, - it is obligatory on
the part of the revenue to return non-relied upon documents and photocopies
of the relied upon documents must also be furnished to the affected parties.

14.It has also been held by the Hon’ble Apex Court in the matter of
TRIBHUVANDAS BHIMJI ZAVERI Versus the COLLECTOR OF
CENTRAL EXCISE reported in 1997 (92) E.L.T. 467 (S.C.), that when
assessee is asking for photostate copies of relied upon documents, then non-
return of documents may severely prejudice right of party to offer proper
explanation and the suffered must be permitted to inspect original
documents and materials sought to be used against them. As regards the
contention relating to the non-return of the un-relied seized records, your
attention is also drawn to Circular No. 207/09/2006-C.X.6, dated 8-9-2006.
Undoubtedly, the circular being issued by the Board, the authorities are
bound by the said circular. The Board circular also envisages the non-return
of such documents also causes undue hardship to the appellant as they
require such records for various statutory obligations. The appellant prays to
the learned adjudicating authority to provide photocopies of the relied upon
documents and to return the original copies of nonrelied upon documents so
that appellant may be able to submit their written submissions in their
defence and also to comply their statutory obligations under the various
acts/law.

15.Whereas the learned adjudicating authority failed to provide the under

mentioned documents to prepare defence reply in the absence of which the
appellant could not submit their defence reply;-

a. Verification report submitted by Department officer at the time

Registration of -- ------------ under the provisions of the GST Act.
b. Copy of Panchnama drawn
c. Statement of all persons on which were relied for raising allegation in
Show Cause Notice.
d. FIR No.-----Dated----
e. Report of investigating officer against FIR No.---------- Dated ----------.
f. Statement of vehicle owner /driver of transporter.
 g. Vehicle in which goods transported whether they are public or private
carrier
h. Date on which the GST registration of ----------- was cancelled and proof
of cancellation; and date on which the Bank Accounts of ---------- were
seized and proof of seizure; and reason for the cancellation of
Registration and seizure of Bank Account.
i. Purchase invoices of -----------
j. All Documents on which Departments relied for raising allegation in
Show Cause Notice.
k. Detail of documents seized at the time of search by department officers at
the premises of the appellant.
l. Copy of statement of Proprietor/Partner/Authorized signatory/Owner of
----------
m. Sale Invoices of Appellant.

OPPORTUNITY OF CROSS EXAMINATION OF THE RELIED

PERSON ALSO WAS NOT AFFORDED TO THE APPELLANT

16.The learned adjudicating authority in the present proceedings has only relied
upon the statement of truck owners and verification report of the premises of
M/s ------. Whereas no opportunity has been granted by the revenue to cross
examine the statement tendered by the truck owners and owner of M/s
---------------and other related person.

17.In the present case, the statements of some persons/witnesses have been
relied upon by the learned adjudicating authority during investigations. The
appellant shall also be allowed an opportunity of cross-examining the
persons whose statements have been relied upon and referred to in the show
cause notice. It is natural that a person facing such an enquiry to have
opportunity to cross-examine an author of a document or a person who has
deposed against him during the course of an enquiry. Accordingly, hope the
learned Deputy Commissioner shall consider the request of the appellant and
allow the appellant aforesaid opportunities. In the absence of above
opportunities, the appellant could not submit their defence reply.
18.It is a settled law regarding cross examinations that when the Department is
relying upon the statement of the any other registered person/person while
making adverse comments against the respective parties, it was the bounden
duty of the adjudicating authority to bring out supporting material on record
on providing due opportunity to the assessee to meet the same. Thus, if
Cross-examination of main accused has not been permitted, principles of
natural justice of the appellant shall be violated. It has been held in the
matter of ANIL PANNALAL SAROGI Versus the COMMR. OF CUS.
(IMPORT), MUMBAI-II reported in 2009 (241) E.L.T. 219 (Tri. - Mumbai)
that,- “Natural justice - Denial of cross-examination of co-noticees based on
whose statements liability of appellants was fixed, resulted in violation of
principles of natural justice - Impugned order set aside - Penalty for
abetment in duty evasion - Matter remanded for de novo adjudication after
affording opportunity of cross-examination of co-noticees as requested by
appellants - Section 112 of Customs Act, 1962. [para 5]”.

19.In such cases, where the buyers/dealers are alleged to be involved in taking
of input tax credit on fake tax invoices/issuing of fake tax invoices etc. then
being accused of an offence, the appellant has a fundamental right against
testimonial compulsion under Article 20(3), ask for cross-examination of the
others and its refusal results in violation of Principles of Natural Justice. So
cross-examination is to be allowed as a matter of right of the appellant. Any
statement or information given to the department by the others cannot be
used against the appellant without giving opportunity of cross examination
the others whose statement/averments have been relied upon by the
department against the appellant. After conducting cross-examination, it
would be able to reveal that whether the statements of the relied person are
found to be worthy of reliance or not.

20.Regarding cross-examination of others Co-accused/relied person, it is

submitted that their statements cannot be considered on face of it, without
testing them for truthfulness. It is more so in a case where their statements
were the only evidence available with Department in support of their case.
Facts that the statements were voluntary or allegation are false or true must
 be cross examined at the earliest point of time, as the averments made in the
statement found to be insufficient. It has been held by the Hon’ble High
Court of Delhi in the matter of BASUDEV GARG 15 Versus
COMMISSIONER OF CUSTOMS reported in 2013 (294) E.L.T. 353 (Del.)
that,-

“Adjudication - Evidence - Statement against assessee cannot be used

without giving them opportunity of cross-examining deponent -
Crossexamination is valuable right of accused/noticee in quasi-
judicial proceeding which can have adverse consequences for them -
However, it can be taken away in exceptional circumstances stipulated
in Section 9D of Central Excise Act, 1944 and Section 138B of
Customs Act, 1962 - Unless such circumstances exist, noticee would
have right to cross-examination. [paras 10, 14]”.

21.The appellant request the Hon’ble Appellate Authority to provide an

opportunity of cross examination to the appellant so the appellant could be
able to prepare appropriate defence reply against the allegation raised in the
Show Cause Notice. It is the recognized principle of Natural Justice that an
opportunity of cross examination be provided to the appellant. The appellant
want to cross examine following persons:
a. Owner/Proprietor/Partner or Authorized signatory of ------------.
b. Owner/Driver of Truck of Transporter in which Goods were transported.
c. Any other person/s on whose statements department relied.

22.In the adjudication process any person, either the assessee or the revenue, is
not agreeing with the statement that has been marked as evidence, then such
person is eligible to cross examine the person/witness to find out the truth. It
is legal right of a plaintiff. Not giving opportunity to cross examine would
amount violation of principles of natural justice. Similarly, not providing
relied upon documents which has been relied upon by the authority in
investigation, which is prominent document for the appellant to prepare the
defence reply and not returning the nonrelied documents also tantamounts to
violation of principles of natural justice.
 ADJUDICATION ORDER DT. --------- IS BAD IN LAW AND PASSED
AGAINST PRINCIPLE OF NATURAL JUSTICE- PROPER TIME
OF FILING REPLY TO SHOW CAUSE NOTICE AND PERSONAL
HEARING WAS NOT GRANTED TO THE APPELLANT

23.In the instant matter, the case has been adjudicated without giving sufficient
time for filing of reply to the show cause notice and without giving the
proper 16 opportunity of personal hearing to the appellant to present the case
and defend himself which is quite wrong and against the Principle of Natural
Justice.

24.As per Central Tax Law, the sufficient time for filing the reply to allegations
raised in show cause notice must be given to party to defend the case so that
party may present the case before the adjudicating authority in the Principle
of Natural Justice. But in the present case of appellant, the sufficient time
was not granted by the adjudicating authority to present the facts and defend
himself. Hence it is clear that in the instant matter, the Principles of Natural
Justice were not followed because that the appellant was not given sufficient
time to reply the contentions of the department and defend himself. There is
nothing even in the Code of Civil Procedure to prevent a plaintiff to make
his reply and claim relief.

25.The Provision of personal hearing is an essential requirement of “Principle

of Natural Justice”. The Order should give decision on the points and
objections raised by the assessee in reply to show cause notice or at personal
hearing.

26.It has been provided in the Central Tax Act, 2017, adjudicating authority
shall give opportunity of personal hearing to a party in proceeding. Hence,
not providing opportunity of personal hearing is not correct and contrary to
law. Such a mistake cannot be expected from such a learned adjudicating
authority.

27.It is a settled law that before confirming the demand, proper opportunity of
hearing must be afforded to the assessee in order to meet the ends of Natural
 Justice. After taking into consideration the pleas put forth by the appellant in
the reply to show cause notice or at personal hearing, the proper order must
have passed. But what the adjudicating authority did in the instant matter is
squarely adverse to the legal perspective and amply against the Principle of
Natural Justice.

28.The appellant has elaborated the matter in the light of some outstanding
judgments in the matter:-

a. MODERN LEATHER CLOTH CO. VERSUS COLLECTOR OF C.EX.-

1989 (43) E.L.T. 155 (Tribunal);- “Natural Justice- Full opportunity to be
heard not given- Order bad in law, there being violation of Principles of
Natural JusticeSection 11A and 33 of the Central Excise and Salt Act,
1944” [para 8, 9)
“Adjudication order- Natural Justice-Ex parte order- Personal hearing
necessary even f no reply to show cause filed- Copes of R.G.1 and Form
IV register for corelation of input and output requested by assessee-
Department declined to return the register but fixed 8 days time for
taking extracts therefrom- Assessee 17 requesting by them- such request
not considered and ex parte order passed without affording any hearing-
Duty demanded at statutory rate rather than the effective rate- It is
incumbent on the adjudicating authority to grant personal hearing even if
reply to show cause notice not filed- Order set aside- Case remanded
back for de novo consideration after allowing perusal of the records,
taking photo copies thereof, for replying to the show cause notice-
sections 11A and 33 of the Central Excise and Salt Act, 1944”. [Para 3,
5”

b. MADHUMILAN SYNTEX PVT. LTD. AND ANOTHER VERSUS

UNION OF INDIA AND ANOTHER- 1985 (19) E.L.T. 329 (M.P.);-
“Demand if invalid if it violates the principles of natural justice- show
cause notice- A reasonable time should be given for reply- section 11A of
the Central Excise Act.
 c. GARDEN REACH SHIPBUILDERS & ENGINEERS LTD. VERSUS
COLLECTOR OF CENTRAL EXCISE, CALCUTTA-1987(31) E.L.T.
545 (Tribunal);- “Natural Justice- Personal hearing is not an empty
formality but to provide an effective opportunity and substantiate his case
in defence- Failure thereof violates the principles o natural justice and
vitiates the proceedings”. [Para 21 & 22].

29.The adjudicating authority was in error in presuming that the appellant were
not interested in further hearing without ascertaining the position from the
appellant in this regard. The order has been passed without complying with
the requirement of hearing and therefore, there is violation of Principle of
Natural Justice. The position is that the case has been decided without
considering the reply to show cause notice. This action of learned
adjudicating authority has cut the very root of Natural Justice and the stand
taken by the authority is contrary to law by which the appellant was not
permitted to make his pleas and reply the inconsistent of sets of allegations
and claim relief thereunder.

30.Also held in the matter of M/s TRANSCOASTAL CARGO & SHIPPING

LTD., Versus UNION OF INDIA2016 (41) S.T.R. 379 (Mad. HC) that,-the
notice of personal hearing though sent by the Adjudicating Authority was
not received by the petitioner. No acknowledgement of receipt was produced
by the Department. The service tax demanded was confirmed by the
Adjudicating Authority, creating adverse civil consequences for petitioner.
The High Court held that inflicting such consequences, without hearing
petitioner, violates settled principles of Natural Justice. The High Court set
aside the adjudication order with remand for de-novo adjudication after
hearing the petitioner.

31.In the matter of COMMR. OF C.EX., RAIPUR Versus CHHATTISGARH

STATE CIVIL SUPPLIES CORP. LTD. reported in 2016 (42) S.T.R. 558
(Tri. - Del.) the Hon’ble Court found that the Commissioner, in the
impugned order dated 09.06.2009 has the office of the Adjudicating
Authority but it is seen that order dated 30.04.2008 was passed without
granting any opportunity for personal hearing. The Revenue has not been
 able to produce any evidence to show that in the letter dated 29.03.2008 the
respondent had given up its right to be heard in person. Thus it is clear that
the order dated 30.04.2008 was passed without personal hearing when there
was a request made for the same and without rejecting that request. It is
certainly an error which is apparent from the records of appeal and such an
error renders the order to be a nullity.

32.In this way, the demand of GST taxes failed due to violation of principle of
natural justice, and the same is liable to be quashed on the basis of
clarification made above and forthcoming paragraphs.

APPELLANT’S GROUNDS ON MERITS

DEMAND OF DIFFERENTIAL TAX OF RS. ------/- IS INVALID

33.At page no. 3 of the show cause notice dt. ----------, it has been alleged that
as per bill book seized, excess sale of Rs. ------------ during the month of
December 2017 and January 2018 is shown as compared to returns,
involving tax amount of Rs. --- --------. These allegations appears to be
wrong and invalid which is explained in forthcoming paragraphs.

34.Therefore, from the above calculations, it is clear that there has been mere
difference of CGST for Rs.---- & SGST for Rs. ----, total amounting to Rs.
------ instead of Rs. ------/- as mentioned in show cause notice dt. -----. The
amount payable of Rs. ---/- as CGST and Rs. ----/- as SGST alongwith
interest payable for Rs. --/- as Interest CGST & Rs. ---/- as Interest SGST
already stand paid by the appellant through Form DRC-03.

THE SGST DEPTT. HAS CANCELLED THE GST REGISTRATION OF

M/S ----------- W.E.F-------–HENCE PURCHASE TRANSACTIONS
BETWEEN PARTIES ARE VALID AND LEGAL

35.It has been alleged in the show cause notice as well as the order that
------------ were non-existent and got themselves registered under
SGST/CGST Act 2017 on the basis of fake and forged documents and hence
from the information available on GST Portal, the department has cancelled
the GST registration of M/-------- -, which symbolizes that transactions held
 between the appellant and ---------. Thus input tax credit taken by the
appellant upon the purchase invoices of ---------------- --------amounting to
Rs. ---------authenticated by SGST Department as proper, valid and legal and
demand to this extent is also invalid & illegal and liable to be quashed on the
basis of above submissions and discussions.

NORMAL PROCESS OF PHYSICAL VERIFICATION OF THE

REGISTERED PREMISES WAS COMPLETED BY SGST
DEPARTMENT ALREADY-NO IRREGULARITY FOUND BY THE
SGST DEPARTMENT
36.As per rule 25 of the Haryana Goods and Services Rules 2017 –Chapter
IIIRegistration, the following provisions has been made;-

Physical verification of business premises in certain cases-

“Where the proper officer is satisfied that the physical verification of the
place of business of a registered person is required after the grant of
registration, he may get such verification done and the verification report
along with the other documents, including photographs, shall be uploaded in
FORM GST REG-30 on the common portal within a period of fifteen
working days following the date of such verification”.

37.In the period August 2017, Haryana excise and taxation department has
asked its officers to find out whether premises companies from the state
have mentioned in goods and services tax network registration are authentic,
a move that seems to be aimed at identifying shell companies.

38.Making compliances of the above referred rules, and following of the

instructions of the department, the Haryana SGST Department was required
to adopt the procedure of normal physical verification of the registered
premises of the taxpayer and submit the verification report upon the GST
portal. It is hoped that department has completed verification process in the
period 2017-2018 Whereas in the show cause notice as well as in the
adjudication order, the SGST department has not provided any normal
verification report of the registered premises of the ------------ -- which was
completed in the 2017-2018. The cancellation has been done in the period
 2019-20 retrospectively from dt. ---------- which is not legal and proper.
Moreover, SGST department has also not provided any grounds on the basis
of which the GST registration was cancelled of M/s ---------------- whereas
the M/s --- -------------- was supplying the subject goods to the appellant July
2017 onwards. It simply means that it is mere afterthought of the department
and also shows inaction of the SGST department in physical verification of
the premises of M/s ----- --------. Any inaction held at the end of the
department in physical verification of the registered premises of M/s
------------------- cannot be used against the appellant. Therefore, on these
invalid grounds, demand raised upon the appellant is not sustainable.

THERE HAS BEEN SUBSTANTIAL EVIDENCES OF RECEIPT OF

INPUTS AND PAYMENT AGAINST SUCH SUPPLY

39.The impugned show cause notice as well as the adjudication order is based
on assumptions and presumptions, as there is no evidence of non-receipt of
goods so far as appellant is concerned and hence untenable in eyes of law.
The impugned order is patently invalid, based on assumptions and
presumptions and liable to be discharged as being untenable in law, as the
alleged demand of Rs.---------- has been raised towards the input tax credit
allegedly inadmissible and availed by the appellant on the basis of the
referred invoices issued by ------------ during 2017- 2018. The said input tax
credit was sought to be denied and recovered on the alleged ground that
suppler was non-existent and 'subject goods' of the said invoice were never
received by the appellant. The appellant submitted that the alleged
inferences, about 'non-receipt of goods/without movement of goods', drawn
by the department based on the so-called evidences i.e. statement of third
parties are improper, unjustified and mere conjectures in as much as the so-
called evidences are inconclusive in nature and consequently, the alleged
demand raised towards the inadmissible input tax credit cannot be
maintained in law, specifically, in view of following undisputed facts;

a. That during the relevant period, the appellant have manufactured and
cleared the final products on payment of appropriate tax by duly
accounting the same in their prescribed records;
 b. That the goods were manufactured by the appellant from the Inputs
obtained by them from various suppliers i.e. manufacturers and registered
dealers including M/s ---------------.
c. The physical receipt of the ‘goods', received under the cover of invoice of
M/s -- -------------- have been duly accounted by the appellant in their
stock registers in Tally Software maintained by the appellant.
d. That the said ‘subject Goods' has been used in the manufacture of final
products which have been ultimately cleared on payment of appropriate
tax as is evident from the perusal of the prescribed records maintained in
tally software by the appellant during the relevant period;
e. That the appellant have made the payment against the said supply made
by --- ---------------- by account payee cheques and such purchases have
also been recorded in their books of accounts.
f. That there is neither allegation nor there is any evidence brought on
records by the department that the appellant have procured any ‘goods’
from M/s ---------- 22 ----in cash and/or that entire or any part of the
payment made to M/s ----------- ------ by cheque has been received back
by the appellant in cash;
g. That there is absolutely no evidence nor any allegation in the impugned
notice/order that the appellant have procured any ‘such goods' from any
other source and availed the credit on the basis of the invoices of
---------------- by projecting such ‘goods' as having been received under
the said invoices;
40.From the above undisputed facts, it is clear that the purported allegations
raised by the department about the alleged non-receipt of the 'input' covered
by the said invoice issued by M/s --------------- are invalid and based on
assumptions and presumptions and the consequential alleged demand raised
on the basis thereof cannot be maintained in law. The referred inputs tax
invoices are duly reflected in GSTR-2A of the appellant which are auto
populated from GST Portal, copies of the same are attached herewith.

THE APPELLANT WAS NOT IN OBLIGATION TO VERIFY THE

CORRECTNESS OF PURCHASE OF M/S ---------------

41.Without prejudice to above, the appellant submitted that they have received
the 'goods' from M/s ------------------- under the cover of GST tax invoices
 and had availed the credit on the basis of the particulars mentioned therein.
At the time of receipt of the Input' under the cover of the said invoices, the
appellant had no reason to doubt the correctness of the details mentioned in
the said invoices and it can be seen that the appellant have been purchasing
subject inputs from other dealers also.

42.The appellant further submitted that they were under no legal obligation to
make an inquiry and ensure that M/s ---------------- have been issuing the
cenvatable invoices only on the basis of valid input tax invoices and in
respect of the goods actually received by them under such invoices. Such an
obligation is not cast upon the assessee under the law nor is it possible to
discharge such obligation.

43.The appellant further submit that except the statement of owners of the
vehicles, the department has not been able to adduce any tangible, valid,
positive and creditable evidence in support of the purported allegations made
in the Show cause notice as well as the adjudication order. The appellant
submitted that there is no admission of -----------, Prop. Of the appellant firm
that the subject ‘goods' have not been received under the cover of said
invoice issued by M/s ----------. The appellant has received the 'subject
inputs' under by the said invoices issued by ----- ------- and used the same in
the manufacture of the final products and subsequently supplied on payment
of appropriate tax - a fact neither disapproved: 23 nor challenged by the
department, and hence the entire alleged premise of the impugned demand
and impugned order disappear

44.They referred to and relied upon following judicial pronouncements in

support of above submissions:

1. THE CESTAT, PRINCIPAL BENCH, NEW DELHI, in the matter of

MALERKOTLA STEELS & ALLOYS PVT. LTD. Versus COMMR.
OF C. EX., LUDHIANA, -2008 (229) E.L.T. 607 (Tri. - Del.):-
Cenvat/Modvat - Documents for availing credit - Invoice did not bear the
correct vehicle number - Appellants allegedly not received the inputs
since the registered dealer had not received the inputs - Appellants
 produced copy of invoice and G/R issued by transport company showing
the same truck numbers - Octroi receipts and weighment slips also bear
the same truck numbers - Denial of credit on the ground that since the
registered dealer had not received the inputs, therefore, appellants also
received the inputs not sustainable – Rule 57G of erstwhile Central
Excise Rules, 1944 - Rule 9 of Cenvat Credit Rules, 2004. [para 4].
Appeals allowed

And finally, when Department preferred an appeal in the above case,

2. THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH,

COMMR. OF C. EX., LUDHIANA Versus MALERKOTLA STEELS &
ALLOYS PVT. LTD. 2009 (244) E.L.T. 48 (P & H), held that Evidence -
Reappreciation of evidence - Once Tribunal taken particular view on
basis of evidence than any other view, even if possible cannot be
preferred - High Court under Section 35G of Central Excise Act, 1944
does not sit as Court of appeal to re-appreciate evidence and record a new
finding of fact. [para 2] Cenvat/Modvat - Inputs, receipt of - Proof -
Tribunal recording categorical finding that dealer produced copy of
invoice showing truck number and G/R issued by transport company
showing same truck number - Octroi receipts and even weighment slips
bore same truck number - Tribunal held that credit hence not deniable on
basis that registered dealer notreceived material - Findings recorded by
Tribunal not suffer from any legal infirmity warranting interference of
Court - No question of law arising - High Court does not sit as court of
appeal to re-appreciate evidence - Appeal dismissed - Rule 3 of Cenvat
Credit Rules, 2004. [paras 1, 2] Appeal dismissed
3. THE CESTAT, PRINCIPAL BENCH, NEW DELHI, in the matter of
SHREE JAGDAMBA CASTINGS (P) LTD. Versus COMMISSIONER
OF C. EX., BHOPAL, 2006 (206) E.L.T. 695 (Tri. - Del.):- Demand -
Cenvat/Modvat on inputs - Denial of credit on ground that inputs covered
by invoices, not actually received by appellant - Appellant brought on
record overwhelming evidence in the form of weighbridge slip,
consignment notes of transporters etc. which suggests that inputs were
received in their factory - Revenue produced no evidence to refute
 appellant’s claim - Credit not deniable - Demand not sustainable -
Section 11A of Central Excise Act, 1944. [paras 5, 7] Demand -
Limitation - Extended period - Suppression - Cenvat/Modvat - Denial of
credit on ground that inputs covered by invoices, not actually received by
appellant - Appellant filed RT 12 returns - Revenue before assessing such
returns, should have made enquiries as to consumption of inputs, and
manufacture of finished goods - Revenue having failed to do so, and
detect nonreceipt of inputs on such examination, cannot now turn around
and allege suppression, mis-statement and fraud - Demand not
sustainable on ground of limitation also - Proviso to Section 11A(1) of
Central Excise Act, 1944. [paras 6, 7] Assessee’s appeal
allowed/Department’s appeal dismissed. 4. THE CESTAT, WEST
ZONAL BENCH, MUMBAI, in the matter of CIPLA LTD. Versus
COMMISSIONER OF CUS. & C. EX., PUNE-III- 2011 (273) E.L.T.
391 (Tri. - Mumbai);- Cenvat credit - Denial of credit - Assessees
received inputs manufactured and supplied by their sister concerns on
payment of duty - Credit cannot be varied are recipient’s end on the
ground that supplier should have paid lesser duty - Rule 3 of Cenvat
Credit Rules, 2002 allowed credit of duty paid on inputs/capital goods
rather than payable on goods – Whether duty was paid by
manufacturer/supplier should be available as credit to manufactures of
final product - Parties cannot be compelled to reverse credit availed on
inputs being credits of amounts of duty paid by input
manufacturers/suppliers and covered by statutory invoices issued by them
- Demand of duty and imposition of penalty not justified - Revenue’s
appeal dismissed - Rule 3 ibid. [paras 5, 6, 7] Assessee’s appeal
allowed/Revenue’s appeal dismissed.

THE CESTAT, WEST ZONAL BENCH, AHMEDABAD , in the matter of

MONARCH METALS P. LTD. Versus COMMISSIONER OF C. EX.,
AHMEDABAD, 2010 (261) E.L.T. 508 (Tri. - Ahmd.);- Cenvat/Modvat - Non-
transportation of inputs, proof - SCN issued on the ground that LR do not bear the
check post stamp and statement of transporter confirming non-transport -
Statement of transporter being in nature of coaccused, cannot be made basis for
holding against appellant unless corroborated with other evidence - Assessee
produced ample evidence in shape of documentary record to prove that they had
actually received inputs from first dealer and made payments through Demand
Draft - Non-stamping of LR in respect of goods received by registered dealer
would not reflect upon fact of non-receipt of inputs - Credit available - Rules 3 and
9 of Cenvat Credit Rules, 2004. [paras 7, 8, 9]. Cenvat/Modvat - Inputs - Credit
denied on ground that inputs such as copper scrap, copper wire scrap, copper rod
etc. were not actually received by appellants and only invoices were issued by
dealer - LRs issued by transporter showing appellant as the consignee of goods -
Mere fact that Goods Register maintained by transporter indicating description of
goods as ‘miscellaneous would not be sufficient to prove that inputs were not
actually received by appellant - In the light of all other documentary evidence in
support of appellant, credit available - Rule 3 of Cenvat Credit Rules, 2004. [para
9] Appeals allowed.

THE HIGH COURT OF GUJARAT AT AHMEDABADCOMMISSIONER

Versus DHANLAXMI TUBES & METAL INDUSTRIES -2012 (282) E.L.T. 206
(Guj.):- Cenvat credit - Availment of - On invoices only, and allegedly without
receipt of goods - Department alleging that vehicles which transported impugned
goods had actually transported other goods, based on two types of LRs issued by
transporter for ‘miscellaneous’ and other goods - However, firm to which they
were transshipped and assessee to whom they were sold stating that goods were
transported and received by them under proper invoices, and both of them had
entered their receipt in their RG-23D and RG-23A Part-I registers, respectively -
Official records maintained at checkpost indicate receipt of impugned goods - No
evidence on record reflected that inputs were not actually received by assessee - In
that view, registers of transporter indicating 26 description of goods as
“miscellaneous” was not sufficient for arriving at conclusion that inputs were never
transported to assessee’s factory - Rules 3 and 9 of Cenvat Credit Rules, 2004.
[paras 4, 5] -Appeal dismissed 7. THE CESTAT, WEST ZONAL BENCH,
AHMEDABAD MOTABHAI IRON & STEEL INDUSTRIES Versus COMMR.
OF C. EX., AHMEDABAD-II-2014 (302) E.L.T. 69 (Tri. - Ahmd.);

Demand - Cenvat credit - Availed on bogus invoices issued by firms without actual
delivery of goods - Evidence - HELD : Credit cannot be disallowed on basis of
statements not corroborated by other evidence of goods not received by assessee -
Invoices issued by registered dealer Star Associates duly recorded in statutory
record books and payment made through banking channels - No evidence that said
amount received back by assessee and that records maintained not correct - Form
40 of Sales tax and purchase tax paid by supplier produced in support of contention
that goods duly transported - As no investigation conducted at consignor’s place,
statement of transporters cannot be relied upon - No statement by supplier that
goods supplied to third parties - Demand cannot be confirmed on basis of
statements by third parties when no evidence to support such statements -
Impugned order set aside - Section 11A of Central Excise Act, 1944 and Rule 13
of Cenvat Credit Rules, 2004. [para 6].- Appeals allowed. 8. THE HIGH COURT
OF GUJARAT AT AHMEDABAD-COMMISSIONER Versus MOTABHAI
IRON AND STEEL INDUSTRIES -2015 (316) E.L.T. 374 (Guj.);- Demand -
Clandestine removal - Demands based on statements of transporters or drivers of
the truck which were not corroborated by any evidence - No investigation
conducted at consignor’s place or at the place where the said goods are alleged to
have been supplied - Tribunal was justified in holding that only on the basis of
third party statements, such demand cannot be made - Section 11A of Central
Excise Act, 1944. [para 13]

Demand - Clandestine removal - Demand based upon the fact that vehicles which
were shown to have transported the goods were not capable of carrying such goods
- Tribunal upon appreciation of evidence on record has found as a 27 matter of fact
that goods were duly found to have been recorded in assessee’s factory and were
consumed in production - Payment was made through banking channels and no
investigation had been made at consignor’s end - No error can be found in the
findings recorded by Tribunal so as to warrant interference. [para 15] Demand -
Cenvat - Consignor only issued invoices to assessee, alleged - Payment to
consignor made through banking channels - Tribunal found that all the purchases
were duly recorded in statutory books of assessee goods were also found to be
entered in its statutory records - Department had not made any investigation at the
unit of assessee - None of the consignors of goods have denied clearance of goods
to the assessee - Tribunal justified in holding that on the basis of statements of
some transporters which were not corroborated by any material on record, a huge
credit could not be disallowed - Demand and penalties on assessee and co-noticees
rightly set aside. [para 19]. Deptt. Appeals dismissed
. THE CESTAT, WEST ZONAL BENCH, AHMEDABAD-SIDDHARTHA
BRONZE PRODUCTS PVT. LTD. Versus C.C.E. & S.T., BHAVNAGAR2015
(328) E.L.T. 429 (Tri. - Ahmd.);- Cenvat credit - Denial of - Wrongly availed
credit without actual receipt of inputs - Evidence - Cross examination of witnesses
- Disallowance of - HELD : Present proceedings are second round of litigation and
Tribunal had remanded matter for de novo adjudication after observing principles
of natural justice which included right to cross examine - Right to cross examine
can only be taken away in exceptional circumstances specified in Section 9D of
Central Excise Act, 1944 - Revenue alleging goods not transported to assessee’s
factory in Gujarat as transporters did not avail route through RTO Check post and
relied on statements of transporters, CHAs and buyers etc. but no opportunity
provided to assessee to cross examine witnesses - Statements of transporters and
others cannot be relied upon as no cross examination allowed - Mere fact that
transporters’ Lorry receipt did not bear stamp of Check Post no ground to presume
that goods never transported to assessee’s factory - Evident from Panchnama dated
10-2-2006 that sufficient machinery installed in assessee’s factory to manufacture
scrap and no evidence on record that said machinery removed after said date -
Chartered Accountant’s certificate of utilization of inputs in manufacture of final
product produced - Documents submitted to support Assessee’s contention that
finished products actually cleared to buyers - 28 Evidentiary value of records
cannot be discarded on basis of statements of third party which is not testified by
allowing cross examination. [paras 8.2, 8.3, 8.4, 10, 10.1, 10.2, 10.3, 11, 11.1,
11.2, 12].

Cenvat credit - Denial of - Wrongly availed credit without actual receipt of inputs -
Evidence - Revenue alleging manufacture of copper scrap out of copper ingots not
commercially viable leading to presumption that inputs sold of by assessee -
Certificates of Chartered Accountant produced regarding purchase of 103
consignments of material, duly recorded in account books and reflected in audited
balance Sheet - No evidence that such huge quantity of inputs disposed of in open
market - Cost Accountant’s certificate produced to substantiate viability of cost of
final product not disputed by adjudicating authority - No direction made under
Section 14AA of Central Excise Act, 1944 to get accounts audited by another cost
accountant nominated by Commissioner - Evidence placed by department ought to
be convincing, even if not proving allegation beyond reasonable doubt, as test of
preponderance of probability applicable on both sides - In present case inference of
proof by relevant facts and records in favour of assessee - Demand of duty and
penalty not sustainable - Impugned order set aside - Rules 14 and 15 of Cenvat
Credit Rules 2004. [paras 8, 13.1, 13.2, 13.3, 13.4, 14, 14.3, 14.4, 14.5]. Appeal
allowed 10. THE CESTAT, WEST ZONAL BENCH, AHMEDABAD-SM
ENERGY TEKNIK & ELECTRONICS LTD. Versus C.C.E. & S.T.,
VADODARA-II 2015 (328) E.L.T. 443 (Tri. - Ahmd.);- Cenvat/Modvat credit -
Recovery of - Credit wrongfully availed during April 1996 to November 1998
against invoices without actually receiving raw materials - Evidence - Cross
examination of witnesses - Disallowance of - HELD : Revenue’s case rests mainly
on statement of transporters denying transportation of material to assessee’s
premises - However, No opportunity given to assessee to cross examine
transporters which is a valuable right of accused/notice in quasijudicial
proceedings - None of the transporters appealed when summons issued, proving
their statements cannot be relied upon - Since statement of executive director
denying receipt of raw material in factory subsequently retracted, it cannot be
relied upon - RTO’s report that vehicle numbers mentioned in invoices incapable
of transporting such huge quantities of material, related only to 11 consignments
out of 66 consignments and it is doubtful if it can be applicable in respect of all 66
consignments credit cannot be denied merely on basis of RTO report - Not
disputed that invoices genuine and goods cleared from suppliers’

end - As per statements of suppliers, goods transported through transport brokers -

Assesse made payments to suppliers by cheque and entire transaction duly
recorded in statutory records - Assessee eligible to Modvat credit - Impugned order
set aside as not sustainable - Rules 14 and 15 of Cenvat Credit Rules 2004. [paras
9, 10, 11, 12, 13, 14, 15, 16]. Appeal allowed. 11. THE CESTAT, REGIONAL
BENCH AT HYDERABAD [COURT NO. II]- AKSHAY LPG VALVES Versus
COMMISSIONER OF CUS. & C.EX., HYDERABAD-IV -2016 (337) E.L.T. 129
(Tri. - Hyd.);- Cenvat credit - Disallowance of - Credit allegedly availed
fraudulently without actual receipt of imported goods in factory - Burden of proof -
HELD : Burden to prove allegations made in show cause notice on Revenue - No
material evidence brought out by Revenue to establish imported goods
diverted/disposed of in Delhi itself and not transported to assessee’s factory in
Hyderabad - Revenue relying mainly on statements of transporter’s partner
retracted before Magistrate and statement of father of proprietor recorded under
duress retracted during cross-examination - On other hand all relevant documents
like weighment slips, job work challans, production register showing manufacture
and clearance of goods on payment of duty, produced by assessee evidencing that
imported goods actually received - No shortage of raw material detected and no
evidence of substitution of impugned raw material - Transactions entered in
statutory records supported by proper banking channel - Documentary evidence
produced by assessee to prevail over retracted confessional statements - In absence
of cogent evidence produced by Revenue to support allegation of non-receipt of
imported goods by assessee, disallowance of Cenvat credit not sustainable - Rule
14 of Cenvat Credit Rules, 2004. [paras 8, 9, 10] -Appeal allowed. 45) The
appellant submit that charges of availment of input tax credit without receipt of
inputs are serious allegations which cannot be held as correct without
adequate/cogent evidences and it is also imperative that the witnesses be
crossexamined to bring the truth on record as to how they have stated that the
goods were never transported to the appellant. Revenue’s case mostly based upon
the statements recorded of various persons and not on any corroborative evidences.
Prop of the appellant company affirmed that the statutory records indicate the true
and correct entries as regards receipt and consumption of the goods. Thus the
allegation of non-receipt of the inputs is not sustainable.

It is also stated that mere statement is not sufficient to establish charge of

fraudulent input tax credit. Whether the goods were physically received or
otherwise by the appellants is a positive act, which must be proved with tangible
evidence beyond any doubt and not with circumstantial evidences. In the present
case charge of non-receipt of goods was made against the appellant. The Prop. of
the appellant firm in his statement categorically stated that they have received the
goods covered under the sale invoices of dealers, the entries of such receipts were
made in the stock registers maintained in tally software, the payments of the said
purchases were made through cheques. This statement of the prop. could not be
negated by the department. The statement of vehicle owners or others can only be
relied upon if the same is corroborated by independent and cogent evidence, which
department failed to adduce. Therefore statements of third person without
crossexamination and without support of corroborative evidence cannot be used
against the appellants. 47) The eligibility criteria for availing the input tax credit
(ITC) and the conditions which are required to be fulfilled for the said purpose are
elaborated here in section 16 of the CGST Act 2017 which are summarized as
under;- 16. Eligibility and conditions for taking input tax credit. (1) Every
registered person shall, subject to such conditions and restrictions as may be
prescribed and in the manner specified in section 49, be entitled to take credit of
input tax charged on any supply of goods or services or both to him which are used
or intended to be used in the course or furtherance of his business and the said
amount shall be credited to the electronic credit ledger of such person. (2)
Notwithstanding anything contained in this section, no registered person shall be
entitled to the credit of any input tax in respect of any supply of goods or services
or both to him unless,–– (a) he is in possession of a tax invoice or debit note issued
by a supplier registered under this Act, or such other tax paying documents as may
be prescribed; (b) he has received the goods or services or both.

Explanation.—For the purposes of this clause, it shall be deemed that the

registered person has received the goods where the goods are delivered by the
supplier to a recipient or any other person on the direction of such registered
person, whether acting as an agent or otherwise, before or during movement of
goods, either by way of transfer of documents of title to goods or otherwise; (c)
subject to the provisions of section 41, the tax charged in respect of such supply
has been actually paid to the Government, either in cash or through utilisation of
input tax credit admissible in respect of the said supply; and 31 (d) he has
furnished the return under section 39: Provided that where the goods against an
invoice are received in lots or instalments, the registered person shall be entitled to
take credit upon receipt of the last lot or instalment: Provided further that where a
recipient fails to pay to the supplier of goods or services or both, other than the
supplies on which tax is payable on reverse charge basis, the amount towards the
value of supply along with tax payable thereon within a period of one hundred and
eighty days from the date of issue of invoice by the supplier, an amount equal to
the input tax credit availed by the recipient shall be added to his output tax
liability, along with interest thereon, in such manner as may be prescribed:
Provided also that the recipient shall be entitled to avail of the credit of input tax
on payment made by him of the amount towards the value of supply of goods or
services or both along with tax payable thereon. (3) Where the registered person
has claimed depreciation on the tax component of the cost of capital goods and
plant and machinery under the provisions of the Income-tax Act, 1961, the input
tax credit on the said tax component shall not be allowed.

(4) A registered person shall not be entitled to take input tax credit in respect of
any invoice or debit note for supply of goods or services or both after the due date
of furnishing of the return under section 39 for the month of September following
the end of financial year to which such invoice or invoice relating to such debit
note pertains or furnishing of the relevant annual return, whichever is earlier.
Analysis of the eligibility criteria as per facts and circumstances of the present
case;- (1) Only Registered person will be eligible to take credit of ITC paid on
inward supplies of goods or service or both, which are used in the course or
furtherance of business. If a person is not a registered person or is a registered
person but has not used the supply of goods or services or both in the course or
furtherance of business, he will not be entitled to claim ITC- In the present case
inputs used in course or furtherance of business. (2) The Credit of Input Tax will
be available to a registered person. As per the definition contained under clause
(62) of section 2 of CGST Act, 2017, Input Tax specifically excludes the tax paid
under composition scheme. Therefore, if a person has paid the composition tax on
its inward supply, he will not be 32 entitled to claim ITC of that amount-Being
regular tax payers, the appellant is entitled to take input tax credit. (3) As per sub
section (2) of section 16, four conditions need to be fulfilled which are: a)
Possession of tax invoice, debit note or such other tax paying document which
includes invoice issued by Input Service Distributer (ISD) and bill of entry as
prescribed under Customs Act, 1962- The appellant is in possession of proper and
valid tax invoice.

Goods or services have been received. – In the present case, subject inputs have
been received and duly accounted for in the books of account of the appellant. c)
Tax on supply is actually paid to the Govt. – The suppliers including M/s -----------
have duly furnished their returns i.e. GSTR-1 and GSTR-3B for the relevant
period. The referred inputs tax invoices are duly reflected in GSTR-2A of the
appellant which are auto populated from GST Portal. d) The recipient shall furnish
the return under section 39 - The appellant have also filed their prescribed GST
returns i.e. GSTR1 and GSTR-3B. (4) The recipient shall make the payment for the
supply of taxable goods or services or both within a period of 180 days. Payment
for both value for goods or services and tax thereon shall be paid within a period of
180 days from the date of issue of invoice by the supplier. If the payment is not
made within the stipulated time, ITC which was availed by the recipient at the time
of receipt of inward supply shall be reversed along with interest at applicable rates.
ITC can be availed when the payment for the value of supply and tax thereon, is
made in at a future date.- Payment of value of taxable goods alongwith tax has
been made to the supplier M/s --------------much before expiry of period of 180
days. 48) From the above discussions, it is clear that all conditions for taking input
tax credit as prescribed under Section 16 readwith Rule 36 & 37 has been complied
by the appellant and thus demand of input tax credit raised by the SGST
department is invalid and illegal and thus liable to be quashed.

BUYER (APPELLANT) IS NOT RESPONSIBLE FOR FRAUD OF SUPPLIER,

IF ANY 49) The appellant in above referred paras has proved that there has been
genuine sale purchase transactions between the appellant and M/s ----------, and
fraud if any, has been committed at part of the M/s ----------------- and for which
the appellant cannot be held responsible. 50) Kind attention is drawn to the CBEC
circular No. 766/82/2003-CX dt. 15.12.2003, in which it has been clarified that
cenvat credit should not be denied to user-manufacturer as long as bonafide nature
of the consignee’s transaction is not doubted. Further, if the supplier has received
the payment from the buyer in respect of goods supplied including excise duty,
action should be initiated against the supplier. 51) For further clarifications the
appellant want to rely upon the following legal pronouncements;- a) R.S.
INDUSTRIES versus COMMISSIONER OF C. EX., NEW DELHI-I-2003 (153)
E.L.T. 114 (Tri. - Del.);- Modvat/Cenvat - Modvat credit - Fraudulent credit taken
by input supplier who sold the same to assessee on invoices carrying duty payment
particulars - Revenue confirming demand of duty against input supplier - Credit of
duty could not be denied to assessees especially since receipt of inputs by them
was not disputed - Rule 57A of erstwhile Central Excise Rules, 1944. [para 5]
Demand - Modvat credit taken fraudulently by supplier of inputs which were sold
to assessee on invoices carrying duty payment particulars - HELD : There was no
error or any misconstruction on the part of assessee and credit could not be
recovered from them by application of Rule 57-I of erstwhile Central Excise Rules,
1944. [para 5] (Matter further affirmed by the Hon’ble High Court of Delhi as
reported in -2008 (228) E.L.T. 347 (Del.)-COMMISSIONER OF C. EX., DELHI-
II Versus R.S. INDUSTRIES. b) UNI DERITEND LTD. Versus
COMMISSIONER OF C. EX., NAGPUR -2011 (272) E.L.T. 280 (Tri. – Mumbai

Cenvat/Modvat - Inputs received by appellant alleged not being those inputs which
were mentioned in the invoice - Such allegation can be verified only by inspection
of input in the factory of appellants only, which could not be done as the inputs
have already gone in the process of manufacturing - Being a prudent buyer the
appellant taken the credit on a duty paying document and same has been cleared
after processing after payment of duty - If there is an allegation that appellant has
taken credit at bona fide belief same is to be dealt with in accordance with C.B.E.
& C. Circular No. 766/82/2003-CX., dated 15-12-2003 - Credit held to be taken on
duty paid invoice in accordance with law. [para 5]. c) SURINDER STEEL
ROLLING MILLS Versus COMMR. OF C. EX., CHANDIGARH2016 (343)
E.L.T. 935 (Tri. - Chan.);- Cenvat - Non-existent supplier - Investigation at the end
of appellant has been done after four and half years of investigation started at the
end of manufacturer/supplier - Factory of appellant was not even searched -
Appellant taken the credit on the goods and informed the department during
investigation - Goods were found entered in statutory records - Same has been
issued for further manufacturing and duty paid on manufactured goods - No
investigation conducted at the end of transporter to reveal the truth whether they
were transported the goods or not - As per provisions of Central Excise Act or the
Rules no duty cast on appellant for verification of contents of
manufacturer/supplier before procuring the goods - Credit cannot be denied to
appellant. [para 6] 52) From the above it is clear that the revenue has not given
cogent reasons to indicate that the appellant had carried out fraudulent transaction
and have taken wrong inadmissible input tax credit. The appellant has taken
reasonable steps to ensure that the inputs in respect of which he has taken the input
tax credit are goods on which the appropriate tax, as indicated in the documents
accompanying the goods, has been paid. Admittedly, in the present case, the
appellant was a bona fide purchaser of the goods for a price which included the tax
element and payment was made by cheque. The appellant had received the inputs
which were entered in the statutory records maintained by the appellant. The goods
were demonstrated to have travelled to the premises of the appellant under the
cover of proper invoice and the ledger account as well as the statutory records
establish the receipt of the goods. In such a situation, it would be impractical to
require the appellant to go behind the records maintained by the supplier. The
appellant, in the present case, was found to have duly acted with all reasonable
diligence in its dealings with the supplier.

The view which the Tribunal has taken is consistent with the judgment of the
Jharkhand High Court in Commissioner of C. Ex., East Singhbhum v. Tata Motors
Ltd. - 2013 (294) E.L.T. 394 (Jhar.), where it was held as follows :- “... Once a
buyer of inputs receives invoices of excisable items, unless factually it is
established to the contrary, it will be presumed that when payments have been
made in respect of those inputs on the basis of invoices, the buyer is entitled to
assume that the excise duty has been/will be paid by the supplier on the excisable
inputs. The buyer will be therefore entitled to claim Modvat credit on the said
assumption. It would be most unreasonable and unrealistic to expect the buyer of
such inputs to go and verify the accounts of the supplier or to find out from the
department of Central Excise whether actually duty has been paid on the inputs by
the supplier. No business can be carried out like this, and the law does not expect
the impossible.” 54) Ultimately, the appellant has taken reasonable steps to ensure
that the inputs in respect of which he has taken input tax credit were goods on
which appropriate tax was paid and input has been duly received in their premises.
Once it is demonstrated that reasonable steps had been taken, which is a question
of fact in each case, it would be contrary to the Rules to cast an impossible or
impractical burden on the assessee. Also held in the matter of M/s S.K. FOILS
LTD. Versus COMMISSIONER OF CENTRAL EXCISE, ROHTAK-2015 (315)
E.L.T. 258 (Tri. - Del.) that,- “Cenvat - Duty paying documents - Fake transactions
- Revenue alleged first stage dealer at not existent - Raw materials stand received
by assessee which were used by him in the manufacture of their final product on
which appropriate duty of Central Excise was paid and monthly return were filed -
Since appellants have received the goods, the burden placed upon them under Rule
7(2) of Cenvat Credit Rules, 2004 stands discharged - A manufacturer cannot be
expected to undertake investigations like Revenue officers and to find out the truth
behind the scene - As long as he is receiving the goods from a known dealer under
the cover of invoices and making payments by cheques, he is deemed to have
discharged the onus placed upon him under the said rule - No investigation stand
conducted by Revenue from second stage dealer, who has actually supplied the
inputs to appellants - Credit not to be denied. [paras 8, 9, 10]”. 55) Therefore, the
impugned order denying input tax credit is liable to be dropped in view of the
above paragraphs. 56) The appellant in the present case want to elaborate here that
major supply of the finished goods i.e. Tiles of the appellant during the relevant
period has been made to Govt. Department/Public Sector Units/Multinational
Companies Builders during the period 2017-2018 amounting to taxable value of
Rs. ---------- which is 58% of the total supply of goods during the period 2017-
2018 i.e. Rs. --------. Out of total value of purchase of inputs amounting to Rs.
-------/-, input of amounting to value of Rs. -------------/- (i.e. 42% of total purchase
of inputs) is from M/s ---------. The appellant failed to understand that if total
purchase of inputs from M/--------- is taken as ‘fake’ by the revenue, then how
appellant made supply of finished goods i.e. tile during the period 2017-2018 to the
Govt. Department and other reputed builders. CALCULATION OF ILLIGAL
DEMAND IS INCORRECT 57) From the contents of the show cause notice, it is
revealed that calculation of illegal demand is incorrect which is explained in
forthcoming paragraphs. During the period 2017-2018, the appellant has availed
input tax credit including the amount on the basis of invoices raised by M/s
------------ towards supply of goods Cement. The details is as under;-

Hence, the illegal demand is erroneous and impugned order so passed is liable to
be quashed on these grounds. It has been held in the matter of M/s UNITY
INDUSTRIES Versus COMMISSIONER OF CENTRAL EXCISE,
VADODARA-II reported in 2006 (193) E.L.T. 314 (Tri. - Mumbai) that,-
“Demand - Calculation of amount - Mistake in adding different figures indicates
misapplication of mind - Demand, otherwise also based on
assumptions/presumptions, set aside - Section 11A of Central Excise Act, 1944.
[para 9(d)]”. 59) The prominent legal pronouncements relied upon by the
department as under;- 37 a) 2008 (10) S.T.R. 405 (Tri. - Kolkata)-TIL LTD.
Versus COMMISSIONER OF SERVICE TAX, KOLKATA;- “Show cause notice
- Defective show cause notice - Basis of calculation of demand not given in SCN
to appellants nor longer period of limitation invoked specifically - Proceedings
flowing from such a defective show cause notice neither legal nor proper -
Impugned order set aside on ground of limitation - Section 73 of Finance Act,
1994. [para 4]”. b) 2010 (17) S.T.R. 530 (Tri. - Del.)-V.S. DISTRIBUTORS
Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR:- “Show cause
notice - Defective SCN and order - Demand under Clearing and Forwarding Agent
service - Invoices not examined by authorities to ascertain nature of service - Not
known how SCN issued and orders passed without identifying documents relied
upon - Documents not identifiable cannot be read in quasi-judicial proceeding -
Identified cogent material to be brought for rebuttal as per natural justice -
Proceedings suffering from legal infirmity - Appeal allowed - Sections 73 and 85
of Finance Act, 1994. [para 3]”.

INTEREST NOT PAYABLE AND PENALTY NOT IMPOSABLE 60) In the

present case, interest has also confirmed under section 50 and penalty has been
imposed under section 74(1) of the CGST/SGST Act 2017. 95) The demand of
interest in the present case is unsustainable in view of unsustainability of the
demand of input tax credit as explained in above mentioned paragraphs. Moreover,
interest is chargeable only in cases where wrong availment of ITC or short
payment of Tax. Whereas in the present case, ITC has been availed in compliance
of section 16 of the CGST Act 2017 and the SGST department could not prove the
allegation of ‘ITC availed without movement of goods with the support of any
corroboratory evidences, demand of input tax credit cannot be sustained.
Therefore, question of payment of interest does not arise. Other than above, there
is no short payment of GST and entire tax liability has been discharged by the
appellant. Under the circumstances, imposition for levy of interest deserves to be
quashed. 96) In the present case, there is sufficient reasonable cause for non-
imposition of penalty under section 74 since revenue could not prove the allegation
of ‘ITC availed without movement of goods except third party statements.
Therefore, there has been no suppression with intent to evade tax at part of the
appellant and penalty is not imposable on grounds of absence of suppression with
intent to evade tax and payment of tax payable already stand paid. Therefore,
penalty under section 74 is also not imposable.

Without prejudice to the above, it is submitted that for the reasons given in the
foregoing paragraphs, the demand in the present case is not sustainable in law.
Once the demand is found to be non-sustainable, the question of levy of interest
and penalty does not arise. In the case of Collector of Central Excise v. H.M.M.
Limited, 1995 (76) ELT 497 (SC), Hon’ble Supreme Court held that the question
of penalty would arise only if the Department is able to sustain the demand.
Similarly, in the case of Commissioner of Central Excise, Aurangabad v.
Balakrishna Industries, 2006 (201) ELT 325 (SC), Hon’ble Supreme Court held
that penalty is not imposable when differential duty is not payable. 98) The
appellant reserves the right to add, to withdraw, to correct, to change, to delete, to
modify any submissions at the time of Personal Hearing in the Principal of Natural
Justice. 99) The ‘order’ is contrary to law and facts of the case and it has been
passed in haste and the order is devoid of judicious and rational approach to the
demand of input tax credit alongwith interest and penalty total amounting to Rs.
---------/-. The order passed is contrary to the Principles of Natural Justice and fair
play. PRAYER 100) In the view of foregoing, it is respectfully prayed that appeal
may please be allowed and Hon’ble Appellate Authority is also prayed to:- (a) to
set aside the ‘order’ appealed against for demand of input tax credit alongwith
interest and penalty total amounting to Rs. ---------/- and allow the appeal in full;
(b)to provide opportunity of the cross examination of the person referred in the
above paragraphs enabling the appellant to file their defence submissions at the
time of personal hearing; (c) to provide the copies of relied upon documents and to
return the non-relied upon documents enabling appellant to file their defence
submissions at the time of personal hearing;